The World Is About To End... AGAIN!!!

Welcome to Money in a Minute! As a minute is all we need this week…

Whilst we had planned on discussing other topics today, global stock markets had other ideas. After what has been a relatively calm (non-volatile) year on stock markets, we have seen some large falls in recent days. How you react to the ‘news’ will determine the decisions you make. 

It’s no surprise whatsoever that the media has had an absolute field day over this, trying their best to create fear and uncertainty because they know bad news sells.

So, whilst the media beat their fear drum, we’ll tell you what’s actually going on…

To be honest, not much is going on!

If we look at the local Australian stock market, there was a 5% drawdown or pullback over the past two days. But if we zoom out, we are about two percentage points higher now than three months ago. If we zoom out even further, stocks are about five per cent higher now than 12 months ago. Over the past year, our local stock market has risen to all-time highs, all whilst there has been lots and lots of discussion about looming recessions and a cost-of-living crisis.

Stock markets move based on assumptions about the future. There are fears the US may enter a recession and so that is what triggered recent falls. Now, if the US goes into recession, the world may follow. Will the US, and the world, stay in recession in the long term?

Well, you could assume everything will continue to get worse until the global economy blows up and money becomes worthless because the world is ending. It’s possible that could happen. Or we can assume things might be rocky for a while, but just as has happened EVERY SINGLE TIME there’s been a downturn, things will sort themselves out and then move to record highs again. We’d argue the latter is almost a certainty… and if the world does end, it wouldn’t matter how much money you have anyway. We’ll, as always, assume the world will keep turning.

Our point here isn’t to point out that returns are better now than in the past, our point is that this is all noise! It’s been a boring year on markets and boring doesn’t sell, so the first chance of some volatility and the drums start beating loudly.

If you want to geek out on historical share market returns and volatility, you’ll find that almost every year experiences a pullback like we’ve just seen.  

We have made our position on successful investing clear. It needs to be boring! Tune out from the noise. Focus on why you’re investing and your timeframe. Years and decades, not hours and days. 

What we are seeing now is normal.

Stay calm and carry on.

Cheers,

Dan and Dave